good morning. let the games begin. alcoa set to officially kick off earnings season. fourth quarter results after the bell. plus, aig is reportedly considering suing the u.s. government over the terms of its bailout. and yum brands is warning of an earnings shortfall due to weakness in china. it's tuesday, january 8th, 2013 and "squawk box" begins right now. good morning, everybody. i'm becky quick along with joe kernen and andrew ross sorkin. if you went to sleep early last night, you missed alabama soundly defeating notre dame. the crimson tide rolling on, winning the bcs national championship game, 42-14. this is the second straight national title for the tide and

the third in four years. we'll have more details in squawk sports a little later this hour. but notre dame didn't show up at the beginning of this game. >> no. >> alabama was the superior team. >> i didn't see a single inning. >> a single inning? you didn't make it to the ninth? >> those rednecks spanked those catholic boys. that's -- >> i watched the first half and then went to bed. >> i think a rutgers/notre dame game might have been better for the viewing audience. >> it was a bad, bad first half. >> the s.e.c., you know, they're looking for somebody to come in that can give them a decent game. >> i'm telling you, they were the only team that showed up. alabama, they deserved this national title. >> yeah, but they got beat. johnny manziel beat them. >> but they looked so good. >> we've seen other teams, lsu has played them tough. >> i'm telling you, alabama is -- >> lsu played them tough. people say notre dame didn't

play anyone. notre dame beat michigan, michigan state, stanford, oklahoma, usc. there were some squeakers in there, though. i think i could have picked -- there's some people that i could have picked that might have given the viewing audience is a better show. >> the 1973 situation where these two played each other in the rose bowl and if you were going to see this, the same thing, last time around alabama had a ten-year favor. >> we could have played the linebacker and played -- i don't know. it was bad. >> i really went to bed. >> if i didn't stay up the previous night -- >> i know. >> you didn't stay up for it? >> i did not. and if i didn't stay up to that, i'm not staying up for some football game, i'll tell you that. >> my soap opera boys who are here. >> i was thinking about you

watching the -- because we hadn't seen the actual end of season two. and i was thinking about what you're missing. there's no way you should not be watching it. >> eventually i will watch it. >> there are. >> i can watch the one that's on. i need to watch it when i -- it's like the new way people view. when you can, when you get a chance. >> did you see that michelle caruso cabrera has the third season on dvd? >> she gave me my soap. >> she did? >> she did. >> she came over the other day. you weren't there at the time, but she was going to show them off. >> yeah. >> let's start with the markets this morning, as well. the s&p retreating from a five-year high yesterday. the stocks finished the session off their lows. u.s. equities are indicated a little weaker. dow futures down by about nine points. as for a gauge of fear in the markets, it extended losses.

now it's at 13.79. european stocks in early trading this morning, you'll see are indicated just a little higher. nos a lot of strength there, although the cac is up by almost .5%. major asian markets overnight closing at -- well, the hang seng was down by almost 1%. the nikkei in japan you was off a little over .8%. shanghai composite a little weaker. we will have more from our colleagues overseas in just a few minutes. now to the corporate story of the morning and it's the buzz you want. aig reportedly considering whether to sue uncle sam over the terms of the insurer's bailout. the "new york times" supporting that the company's board is going to be meeting tomorrow to consider joining a 25 billion shareholder lawsuit against the government. the suit deals with the nature of the rescue, what became of a 92% stake in the company. deals with high interest rates and the funneling of billions to the insurers that wall street clients. the lawsuit says these terms deprive shareholders of tens of

billions of dollars and violated the fifth amendment which profits the taking of private property for public uses out compensation. >> this is ridiculous. >> this is former ceo hank greenberg is pitching aig to join the suit. greenberg was ousted by the company in 2005. >> the company is running thank you ad campaigns right now. >> he's the one who brought the suit. he's trying to get them to sign on to it. by the way, to put some context around it, i think there was maybe a 1% or 2% chance before this article came out that the board was ever even -- now i think there's a zero percent chance. but i think the chances before the article, after the article were next to nothing, anyway. >> and you could say that they have to do this because of fiduciary reasons or of all things. >> the worst thing that could happen is that hank greenberg pursues the lawsuit on his own and hank greenberg actually wins. >> didn't a judge already throw

out this lawsuit? >> it was thrown out in new york. so it creates this backwards bizarre situation. having said that, i think running the ads saying thank you, america, and trying to move ahead with a suit, i think it's crazy. >> just the idea that you would say thank you or we're back on our feet and moving along, there's a public relations nightmare from this. >> the smart readers in the paper today, when you read the statement from aig basically says we have to consider it as part of our fiduciary issue. >> man, talk about bad pr. anyway, the federal government's consumer watchdog is set to unveil new home lending rules. the move could potentially reshape the mortgage market by

ushering in more standardization and preventing the return of the exotic loans. the cfpb will define standards that all mortgage lenders are likely to follow when originating home loans. the new rules are expected to be contentious because they will determine the type of loans that banks will offer as well as to whom and on what terms. there had been concerns that new regulations would restrict credit and make get ago mortgage too hard. in our real estate news, apartment rent continues to rise as vacancies are falling. a quarterly report is set to be unveiled today by rias. the average nationwide monthly apartment rent was $1,048 in the forty quarter, up .6% from the third quarter. year over year, it's up about 3.8%. meantime, the vacancy rate is at its lowest cincinnati 2001. >> chesapeake's ceo will be the receive a bonus for 2012.

the oil and gas company is battling a financial crisis and a regulatory strain. other actions taken include cuts to incentive pay and mistakens to increase shareholder influence. and in some other corporate news, yum brands warnings earnings will fall below company's expectations. sales in its two china divisions shrank deeply in the fourth quarter. yum is blaming adverse publicity about the poultry supply. >> a guy made a joke about the poultry supply and this is what happened. >> it wasn't you, necessarily, but you did make a completely unfair characterization. >> unfounded. >> apparently the chinese government did, too. >> i don't know, the chinese government didn't say it wasn't real chick.. what did you say? you said it was a cat or something.

>> i like all animals. >> you might not have been here. it was terrible i couldn't m didn't like it and they shouldn't have liked it. >> they did? >> and yum is still sensitive from that frivolous, ridiculous suit that went nowhere about the taco meat that wasn't taco. wasn't meat. >> wasn't taco? >> wasn't meat. >> but anyway, this chinese government had some bad publicity and it did impacted sales. >> what did china say about the meat? >> i don't know. that's what i wanted to look up. >> late last month, the chicken was expected to contain large omts of antibiotics. >> this is the only tweet i've

seen. you all look very nice today. let's forget yesterday ever happened. >> you're referring to the shirt? >> someone is. someone is. >> wait, you guys did this again. >> this is a new -- >> it's like a uniform today. >> this is an uncle sam. the last kick the can was a -- >> i like that one. why did you get that one from? >> same place. since the fiscal cliff, this is uncle sam kicking the can. >> i heard ross westgate earlier this morning saying that they have banned that phrase, kicking the can. i said it yesterday and i cringed as i said it. we overuse it completely. i think he's probably right. i like your tie. >> probably a year ago we tried to change it to something else. but i did cringe as i said it. >> eddie lamp ard is saying the

ceo is stepping down next month citing family health reasons. chairman eddie lampert is going to be assuming the role. he had a 31.1% stake in sears holding. shares of sears during the last year, take a look at this. it's like going nowhere fast. pretty much has been the story of sears. >> can we take a look at that? >> i don't know if we can take what look -- was lampert never the ceo? >> there was a period where he was the this eo, but it has been minimal. >> this is a better look at what's going on in this company opinion you can see there in '08, there are 100 dollar stocks. >> it looks like lampert was really going to get it going. >> this is a better look at things. and i think if he did this -- i

have to go back and look at when that transaction happened. >> back in '03 or '04. >> here we are, 42.92. >> another question, how long is he going to be the ceo for? >> is he a retailer, is it not? a lot of questions about what's happened this year during his tenure. having said that, you know, your year on year ibetas -- >> retailing is hard work. through there is a basis that year on year, it's better. >> did you see the terry l u u n lungren's piece on electric? >> oh, yeah. it was a great piece. more importantly, i didn't

realize he had been on the dating game. >> how did the date go? >> i was going to ask him. but back in the '70s, could you expect things to work out successfully? i don't think so, right? unless jennifer granholm -- oh, my gosh. >> he is like got a sense of passing. >> daddy called him, he looks look 007. >> i went to the jets game, we were sitting next to each other. it's freezing, everyone else is wearing hats. he looks perfect. absolutely -- his hair is perfect. >> he would freeze before he would look bad. they say he looks like pierce. i think he looks like a super hero before he's change.

>> superman, but not super nerds. >> let's get to the global markets report. kelly, we did hear you stand by this morning to hear about that kick the can phrase. not allowed to be said any more. we agree. >> he wouldn't even let me ask if that was the phrase we were talking about. as you say, the struggle is coming up with something to replace it. i feel a feeling we're going to use that one quite a bit. let's take a look at what's happening overseas this morning. for the most part, european equities are higher, shaking off the news that the eurozone's unemployment rate rose to 11.18% in november. that is a euro area high. if you move forward into decent, you can see the aumt of prices. they're prizing in some easing from the central bank down the road. quick look at what is happening at the bond curve.

5.1, just under 5.1%. the spanish treasury outlining the funds you will need for 2013. you can expect they're going to take as many advantage of these conditions as possible. italy, 4.3% on the ten-year. the gilt yield, above 2%. we will explore what's happening with growth going forward. slipping over now to currencies, here is what we've seen some interesting moves. may not look like much this morning. the euro/dollar is roughly flat. but the dollar/yen moving down by about .3%. it was really actually some support from the euro that came from comments out of japan. japan will be investing, bonds buying in the esm. that is an order to indicate some level of support for the eurozone project. but it also works to help, yes,

weaken the yen. on that note, back over to you. >> it's always about the yen. kelly evans in london. the can. thank you. >> we're not going to forget that one. coming up, why electric cars may soon make more money. and we'll be welcoming drew mattes to the table to find out what he says will draw today's trading session. stay tuned for that and a lot more.

welcome back to "squawk box" there morning. take a look at how u.s. equity futures are opening the day. the s&p would be off about 1.5 points, dow jones off about 9 noints and nasdaq off 3 points. the government wants all hybrid and electric vehicle toes make noise when traveling under 18 miles per hour. the national highway safety administration says the vehicles don't make enough speed to warn pedestrians. you hear this all the time. did you ever see a hybrid car? they're so quiet. >> they are quiet. you don't want to step out in front of it. >> there's no sound there. >> is it the same thing with the camera, some of them don't have a shutter noise? i like the ones that put the fake shutter sound back in.

>> the sound would be very cool, i think. >> if you've ever discuss add loaf of just purchased bread that has mold, microzap claims its technology allows bread to stay mold free for about 60 days. this process, by the way, could eliminate baker eps a needs for conservatives and ingredients used to preserve flavors. i like the idea of getting more of those preservatives out. mike seidel is now joining us from the weather channel. >> good morning. another great day in the northeast. things are warping up. it doesn't feel like january. new york city, sunny and 47. waudz, 53. back in charleston, west virginia, down to 53 degrees. now another story developing, rainfall is beginning to hit parts of texas. some areas could get 5 to 7 inches of rain over the next couple of days.

if you're flying out of houston's airport or dallas, there may be delays tonight and tomorrow. some of these storms could produce severe weather. there's a chance of a tornado tonight or tomorrow. not a huge chance, but there will be some severe storms. florida looks terrific for the foreseeable future. highs, upper 70s and low 80s. even in miami, 82 is above average. your average high now is about 76 or 77 degrees. sunny and mild, midwest. chicago looks terrific. a little clipper system with some light snows north of minneapolis. better chance of snow there by friday night and saturday. the west is quiet now, but a storm coming in will reintroduce fresh powder for all the west beginning today for the next couple of days. in the meantime, sunny skies in l.a., wind and rain in seattle. as far as the form goes that's tracking out of texas, this will be the big weather story for the next couple of days. also the big weather story is the fact that there's rain. even up into chicago and the midwest, some of these areas

under flat flash flood watches for 5 to 7 inches of rain. here comes an area towards chicago. that rain eventually will head to the east coast which brings us to the wrap up here. new york city's five-day forecast, and you wouldn't think it was january by these numbers. thursday, 44. a little rain with a front than behind the front. look at the weekend numbers. lows in the mid 40s and highs in the 50s. very mild weather. late next week, it will get colder. but, again, a lot of us, thank you in the east and in the west. let's talk markets now. joining us now from ubs, senior economi economist. we've been talking about the debt ceiling and one issue we've not talked about on this show yet is what i think is a crazy idea, but i think you know where i'm going with this about this

platinum coin that everybody is talk about. about whether the treasuries get over the debt ceiling, can actually mint a platinum coin worth $1 trillion and call it a day. but i feel like it's getting transaction in weird places. >> well, among politicians, so there's your point. look, here is a couple problems i have with it. one is that the fed is not allowed to buy platinum. so how does the money get created? the government can print whatever it wants on any coin it wants. it's a clever idea. gold coins work and the amount of gold is more than ta face value so you never sell it at face value. so you would have to have a coin that would be worth more than $1 trillion after you melt et down and -- >> but would that convince

anybody that we have any situation on what's going on and we've managed it? >> absolutely not. and the person who came up with this idea would be the first to say that. >> who came up with it? >> i don't know. i forget the exact name. but -- >> the 14th amendment -- >> the white house is -- >> the 14th amendment is that the president can do whatever it takes in order to maintain the u.s. debt. so basically to avoid default. the problem with that, though, is that who is guy to buy the u.s. treasury securities if the president went ahead and said the debt ceiling doesn't matter and they issued this debt? as an investor wes i don't want to own a piece of debt that might be illegal three months into the future. so these are interesting ideas, but -- >> i think there was a congressman yesterday who is putting together a bill to stop this from happening. >> yeah. i don't think the fed would take it, right? first of all, the fed cannot buy it because it's not gold. they can't buy mratd numb. that rules out the idea of the fed monetizing it.

and if you're not going to deal with federal reserve notes, which is what you and i have in our wallet, it's trying to get somebody to take it as payment for something is a whole other matter. >> let's talk about things that are more realistic. earnings season begins today. alcoa we're going to get after the bell, right? your sense on where we are? >> i mean, it will probably be okay. firms have been very aggressive, imagine their cost structures. one of the reasons why we think terms are going up is because shares are moving towards appear ex and labor is more variable. you could still end up with a decent earnings season despite relatively weak growth in the fourth quarter. >> and your chance on fomc? >> mountain out of a mole hill. this is the same fomc that gave us the doubling of the fed balance sheet. we're supposed to believe they're hawkish in some way. the idea that they're going to have to stop buying a mess of securities sounds great until you get a negative equity market

reaction. my experience with ben bernanke, just watching how it works out, is that when the equity market sells off, ben bernanke gives the equity market whatever it wants in order to keep it up. he is worried about the wealth effect and he's going to do whatever it takes to keep that wealth effect. >> and you don't think there's going to be a pullback at the end of year? there could be a small pullback at the end of the year, but we're not talking about the complete elimination of purchasing. we're talking about maybe going from 45 to 35. we're not talking about anything that's going the lead the u.s. treasuries not filling a massive amount of debt, especially for the federal reserve. >> i learned a lot. thank you. appreciate it very much. coming up, black hawk's chief investment officer after a pause in the rally yesterday, we'll ask if the bulls come back today. but first, celebrations are planned today for the 78th birthday of the king of rock and roll. elvis presley's hometown of tupelo, mississippi, have a number of events including a film tribute and the lighting of its first statue.

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i'm joe kernen along with becky quick and andrew ross sorkin. u.s. equity futures at this hour are slightly lower. did close down 51 points or so yesterday. making headlines, a pilot program for volt in the stock market is now not likely to be rolled out until april. not seeing a whole lot of volatility. we could use a little volatility. i don't know whether we need to ramp down the volatility at this point? we got a 13 on the vix. changes and financial industry groups want more time to prepare. it's the so-called limit up limit down initiative was approved by the s.e.c. back this june. it would pause trading of individual u.s. listed stocks if they loved outside of praise range based on where they had recently traded. during the time-out, traders would assess whether they get a time-out. >> actually, this is a good

thing. it will prevent the flash crash test. >> it will give us a chance to find out whether the stock's move was a glitch or a move. there were proposed testing schedules for the program to traders on yesterday. >> do you think the time-out is going to work? >> you should get a time-out. >> my boy has a time-out, he keeps going. that's why it may not work. >> kyle has a teacher that says, this is my time-out shirt. >> is there one you're thinking of -- >> he gets his trip and then he says he wants to stay there because he's happy. the time-out is not working at all. >> he can escape from the crib, though. >> he's really smart. >> he now has a tent on his crip because he knows how to escape. and he loves it. he says, close the door. >> do you have a padlock on it? >> no. but he now knows how to open it.

blackrock is out with its what's next in to 2013 report. joining us now on set is russ, blackrock's chief investment strategist. you say there are a lot of risks still out there for 2013, but maybe the biggest one is that you'll miss out on any up site if the market takes off. >> any one of the things which is distinguishing this year from others in the market is the tail risk in the market. if anything, it's more entered on the u.s. but a lot of the more macro, larger risks that really kept a lot of investors on the sidelines in 2012 have come off the table. europe is much less of a risk than it was a year ago. we don't see the same type of concerns about a dissolution of the euro. it really was a headwind for the markets, a lot of early 2012. >> is that good news for u.s. stocks when you look at it or is this something that makes europe look more attractive relatively speaking? >> it's probably both. it does make europe look more

attractive. there's some companies that sell cheap, they sell globally. but it's good for the u.s. it lowers the risk premium for u.s. stocks. it helps the valuations. it's good for global equities. >> you're not necessarily looking at u.s. sent ricentric ? >> the u.s. was the safe haven. we could argue whether that was deserved or not, but it was the best house on a bad block. but because of that, the u.s. is a bit expensive compared to other markets. stocks are still cheap, but not as cheap as they are in asia or other parts of the world. one of the themes is cast is wider net. some of the better opportunities we're seeing are not just in the u.s., they're in europe, as traul ya and emerging markets. >> is there an assumption that this will get dealt with, whether it's in the final hours or whether this is something --

that's messy along the way. the prices right now, is that reflecting the assumption that something gets dealt with? >> i think so it does. the vix is at 13. it's difficult to argue there's a lot of fear in the market. i think investor webs there's the belief that there's always an 11th hour compromise was reinforced by the fiscal deal. at least it happened. that convinced investor that's no matter how many drama you get out of washington, that you could see it. >> does that mean if the deal does come through, we're not going to see an upside and if the deal doesn't happen, you'll see a big clash? >> i don't believe the u.s. is going to default on its debt. that said, the risk is similar to the fiscal cliff. you get a bad deal. to your point, i think if you do get a bad deal if it happens in the last minute, if there's another downgrade, there is risk in the market which makes last week's rally hard to understand given that you get three big fiscal issues coming up.

you've got the debt ceiling, you've go the sequester. on march 11th, you get a continuing resolution or the government can't fund itself. >> but, again, we've seen all the upside to a solution being worked out, however bad that solution is, we've seen the gains based on what we saw last week? >> i think we have seen the gains. from here on in, it is dependant on the fundamentals, you get a better-than-expected earnings, you can with stand the fiscal flag on it. to me, those are the big factors that will drive the equity markets. >> when it comes to earnings and the season that kicks off tonight with alcoa, it's all going to be about guidance. we're not looking at the fourth quarter as much given all the weird things that happen. this is about how confident ceos are on the calls. >> i think it is about confidence. are companies going to send? what is the expectation for the consumer? >> at the end of 2012, it wasn't awful. it's still conforming to the slow growth sluggish economies

have had. on top of that, you've now put on about 1.5% of fiscal drag. you may put more on top of it if the sequester gets kicked in. you have to be concerned about growth in key one and two. >> i heard that consome consumer sectors, things like leisure travel, consumers continue to spend. what sectors are you looking at as ones that are the best place where you might see the most up side? >> i think the places we see the most up side are those that are less leveraged in u.s. consumption. so places like u.s. technology, energy particularly in the service sector, places where even if you do get some disappointment on the consumption, are going to be worried about q1, that these companies still have the ability to outperform because they leverage a global growth, they're leveraged to emerging market. one other things that's suggested is looking at larger companies. i had a big rally in small caps last week, but the companies that are from the best positions are the mega and the large caps, not the small caps.

>> if you're looking at big companies that are global companies, what are you talking about, a cisco or something? >> yaes. i think that's a good example. companies that are leveraged in infrastructure, companies not so dependent on that consumer wallet share. >> thank you very much for coming in today. >> thank you very much. coming up, we're going to take a crip to the futures pits and check on the early action this morning. but first, check this out. mcdonald's changing its name in the land down under. for one month, mcdonald's restaurants are going to be renamed macas, a local nickname for the change. the fast foot giant is making the change in honor of australia day. a roent survey found at least 50% of the ought trailans use the name macca's instead of mcdonald's. i don't spend money on gasoline.

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welcome back, everybody. take a look. u.s. equity futures barely nudging at this pour. markets trying to figure out which direction it wants to go. we did see big gains at the beginning of the year. now things have stalled out. we have earnings season coming up and a lot of people are going to be looking to see what the guidance is, figure out which direction to go from here. in our headlines this morning, a chinese businessman pleaded guilty to selling stolen american software that was used in defense. space technology and engineering and u.s. officials say that this case is the first of its kind. prosecutors report that the products held a retail value of march than $100 million. the sophisticated software was stolen from an estimated 200 american manufacturers and sold to 325 black market buyers in 61 countries between the years 2008 and 2011.

>> and now to the futures pits and kevin ferry. you know, kevin, you've been, you know, sitting around watching grass dry, watching paint grow in the ten-year. finally, a little bit of movement, anyway. what do you expect for 2013? >> okay. yeah, you know, quite active obviously until the end of the year. as becky was pointing out, i think the really interesting thing is that since the information on friday, all the markets have calmed down appreciably. so, you know, i don't think that's necessarily a bad thing. so there was a lot of -- the ten-year note's topped a lot. that was the high. all of a sudden in the last week of december, everybody recognized that it was lower. and you started to hear things like the fed was going to stop or that we were in a bear market. i think it's way too early to get excited about that. but you did see that the market moved back what i think was better value and now allows for

these other debates about the debt ceiling and whatnot to take place with what i would tr a much more constructive cushion or a rate concession built into the market. >> so the other market that you might not follow as closely, how about currency markets, gold? what are you seeing? it's early. >> here is the thing. the big thing for us back there is after being frustrated quite a bit, it started to see the last part that worked out quite well. but here is the difference. it started that the yen was pushing down highly correlated to driving the market here down behind it. if you noticed, in the last week, it was the note market here. the yen was trying to stabilize. and those lows began to beat the yen up a couple last time. so as we stabilize on friday, now you've seen a two-day correction up in the yen. but abe and aso now seem to be committed that they have to make it go down again. and so the timing of that trade

to start beating up on it i think is only a matter of hours or days, certainly not weeks. >> and what -- over the next 12 months or so, they're still in a -- i don't know, a notion that gold is still going to creep its way back up towards 2,000 because of the global easing by all the central banks. i don't know. if stocks were to get more attractive or if the economy were to do better and there were other places to go, is it possible gold continues to consolidate for the next year in 1500, 1550 is possible? >> multiple years. i'm not much of a gold person, obviously. we look at gold and the term structure of real interest rates. and beyond that, i don't really have much use for it. but we were a big fan of selling silver as i pointed it out to you guys on your show one morning. so i think that was a temporary trade and those people will come back to it for a veert of reasons. but if other things yield

better, i think that, you know, they'll move money out of it and it doesn't have to collapse. it will move sideways like it did for the decade at the low. i think that the other thing that you see is that for us, you were able to take advantage of prices in 2012 and buy things on the chael and is remain constructive. you know, what we told our clients at the beginning of the year was it's harder to do that. you can't keep tricking people that he end of the world is coming. that was last year's modum operandi. we think it's going to be tougher. that's not necessarily a bad thing, either. i'd say one point i'd like to make real quick about the debt ceiling. my friend ed bradford and i have been talking about this. forget about the coin. forget about the constitution. the united states could, like britain, issue annuities for what they call console. you could become a never ending equity owner in the united states of america.

that goes -- it would have nothing to do with the debt ceiling and they would be able to finance themselves easily at a low rate. and i think that the whole country could get behind that concept. >> although there's still a dysfunctional washington and that's not good news over the long-term. >> you bet. but at least it takes people out. i mean, you know, i guess if you don't know that washington is completely dysfunctional by now, then we're not doing a good enough job of getting the message out. i'm just saying that there's a lot of misinformation, as you know, about the debt and what the debt needs and how the united states finances itself. and there are other alternatives in playing gimmicks with coins or taking the real attention away from what needs to be done. there's a lot of debt. there's going to be debt. and you have to really draw the line between what is the budget deficit and what is the large amount of debt in the system. people like to leave off what is on the other side of the balance sheet. those are all the great as etss that go against those

liabilities. >> i don't know about washington being dysfunctional. if in two years the country wants to elect, you know, a completely democratic house that will agree with everything that the obama administration wants, then we'll do that and we'll electric more democratic senators, the democrats can control the house, the senate and the white house and we'll give the president a rubber stamp on everything and washington will be totally fixed and we'll live in this great, great european country. so maybe it will go that way. but if it doesn't go that way and it's not washington, it's the people that send these representatives to washington who disagree with -- there's a 50/50 people split in this country of people who love entitlements because they're people on the receiving end and there's people on the other side who is funding everything. i don't know. i don't know whether it's a broken washington or we're just at a crossroads in the way the republic is governed and we have to make a decision as a country

which way we head. >> right. that's definitely a lot of the ltage. there's still a lot of assets on the other side of the balance sheet of all those liabilities. you have to focus on growth. growth should be the -- you know, that's still the best way out of of this whole thing. >> it is. i know. anyway, kevin ferry, thank you. see you later. >> okay. coming, we're getting highlights from last night's national championship game. but first, in media news, late night tv is getting even more competitive. abc's jimmy kimmel is making a move tonight to 11:35 and displacing night line from that long time position on the network. the network says it's going to see higher ad rates due to the move. "nightline" moves to after jimmy kimmel at 12:35. what are you doing?

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welcome back to "squawk" this morning. making headlines, samsung electronics says it's likely earned a quarterly profit of $8.3 billion, selling about 500 handsets a minute. samsung also benefiting from a pickup in demand for flat screens it makes for mobile devices, including those for rival apple products. but some analysts say investors are concerned samsung's momentum may slow in the first half. also at ces they're selling a $20,000 television that starts -- >> what? >> the new tvs start at 60 inches and go up to 100. >> 85?

>> i heard about it. >> 85, that's -- >> life size at some point? >> oh, no. we wanted -- >> right. >> it will be in like two years. >> wait. that would be -- it would be more expensive to remodel your living room. >> now to sports and i like the sweater. i like you in that sweater. that's the sweater. >> i was in wisconsin when you said that i wore -- >> i don't think the guy could wear a sweater. but you're casual. you got the casual, almost a suito jean type thing going on. >> do a couple interviews in the field today and this is what they want me in. >> and we're talking sports. what team could have been a good national champion? i think texas a&m might have been the team. >> well we talked about this off camera. it shows ow good johnny manziel is for how he played against alabama. they say the georgia/alabama game and the s.e.c. title was

for the national title. obviously notre dame got smoked. just waking up, 42-14. >> they didn't show up. >> becky summed it up. you guys have to go to bed. literally the first play was stopped for a loss then after that it was a big pass and then it was over and becky said she turned it off at halftime and i think that that's basically what everyone in america. ratingswise i think it's not going to be as big as some expected. >> analysts kept trying to say things like oh, this will be the play where they might be able to your honor it around. >> no chance. >> in fact, they're not going to turn this around. >> i was going to bring this up later. but you know who katherine webb is? >> oh, yes! i do. >> have a listen. >> she's got like 300,000 followers now. >> have a listen to brent musburger in the first half on katherine webb. >> that's a.j. mccarron's girlfriend. and right there on the right is dee dee bonner. that's a.m.'s -- you quarterbacks. you get all the good-looking women. what a beautiful woman. >> wow.

>> a.j. is doing some things right. >> take it easy, brent. on national television. >> he had 585 twitters followers before that. then she had like 300,000. >> she got 100,000 during the game twitter followers. she's miss alabama, went to auburn and that's a.j. mccarron the quarterback's girlfriend. brent was a legend. technically captivated attention because the game wasn't captivating his attention. the other thing i want to point out to you guys is vegas. the big money, i was toltd, was on alabama, but there were more bets on notre dame. that means -- >> people who went with their hearts rather than -- >> and the smartd money took alabama. >> what was the spread? >> it ended up ten points by the end of the afternoon yesterday. so vegas did not make out because they wanted alabama to win and not cover. >> so early on, as notre dame before they were undefeated, they were hoping for a foil to go -- or not a foil, but a, like

a david to up against. it was almost like a fantasy thing to get someone who go up and be this year's, you know, other side. >> i heard some people complaining about some of the calls and stuff last night. but i got to tell you, alabama was just a better team. roll tide. they won. they were a better team. >> even before alabama got beat by a&m there were a couple of close games where they looked -- didn't lsu play them tough? >> yeah, the s.e.c. is so tough, they're not perfect. you can't paint them as some, you know, juggernaut. they had -- >> then florida got beat by some crappy team in the bowl game. >> not crappy. >> well. >> you're right though but they clearly were the best. >> we have more of this morning's top stories including some executive shake-ups at three companies. woman: we're helping joplin, missouri, come back from a devastating tornado. man: and now we're helping the east coast recover from hurricane sandy. we're a leading global insurance company,

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the calm before the earnings storm. what's on investors' minds as the busy season kicks off today after the bell. mark fauber will tell us what he is seeing ahead. >> the next fiscal threat to america. we are doubling our efforts to rise above with wisconsin senator ron johnson, and former bb&t ceo john allison. >> and the latest read on how small business owners are coping with the debt ceiling debate, and what it means for the economy. second hour of "squawk box" starts right now. good morning and welcome to "squawk box" here on cnbc i'm andrew ross sorkin along with joe kernen and becky quick. take a look at futures. see how the market is setting up today.

red arrows across the board. dow looks like it will open off about three points. nasdaq and s&p 500 marginally lower. we also have some executive changes to report prominent in the headlines this morning. dell's senior vice president for corporate strategy david johnson is leaving to take a senior position at the blackstone group. johnson joined dell in 2009 from ibm and you might remember this. it was a controversial move. ibm had announced an unsuccessful legal challenge to keep johnson from joining dell in the first place citing a noncompete clause. also this morning sears chief executive louis deambrose yo is stepping down on february 2nd. citing family health measures for the reason. chairman eddie lampert has been taking over as the ceo position at that time. of course, the company had a hard time with its stock down about 6% over the past five years. compare that to walmart which was up 50% and you can see where this is going. also american airlines senior vice president craig keyinger is going to become ceo of virgin atlantic. he's going to assume that job as

of february 1st. current ceo steve ridgeway is retiring after 11 years on the job. >> let's welcome our two guest hosts who will be with us for the next two hours. first up we have senator ron johnson who is a member of the commerce and budget committees. also john allison, former bb&t ceo, also president of cato. welcome to the both of you. we have a lot to discuss with you. first we want to get to some of the things we're going to be talking about over the next two hours. guys, we have you here because we have some serious issues. things that are facing our nation and i know you both have some very serious thoughts about them. >> true. >> senator, you brought some cups that i think lay out some of your concerns. >> listen, what i like to talk about, obviously, is how do you start decreasing the level of uncertainty, bring certainly back to this economy, you know, restore confidence so we can get our economy growing again which is the primary, that's the best way to solving our fiscal situation. i think the other problem we've got to solve is the fact that people really don't understand the steph sit problem.

you're aware, i'm big into charts and graphs and we put some of those on cups, things like the bankrupt universal security system. so it really is about getting the american people to understand the full depth of our situation so we can fully do the -- make tough choices. >> we've had a lot of people who have talked to us who said that this is not something that washington will be able to handle on its own. that it's not something they expect to get passed unless the american people kind of step up and push for this. i guess that's your opinion, as well? >> absolutely. the american people need to understand what the problem is so they actually support the solutions which aren't going to be real fun, quite honestly. >> okay. and john, same situation? >> the thing i want to focus on is the fact that the real challenge is government spending. how our spending is financed is less important. than the fact we're spending too much. government expenditures, including the regulatory cost, which is really a government cost, now are over 50% of our gross domestic product. a country that operates that level ends up with much slower

growth rates and the compounding fact of that is to radically reduce the quality of our lives in 15 or 20 years and it's proven. friedman proves this a long time. >> the president of the cato institute not the cato welcome, right? >> yeah. >> when did you take over, john? >> october 1st. >> the whole deal, cato. so breathing more objectiveism into some entity that already got a little bit of objectiveism into it already, doesn't it? enlightened self-interest? >> and limited government. the history of limited government is good and the history of big government is bad. >> we'll talk in two seconds. i just made a point with kevin offhand about everybody's says washington's broken and it's like, you know, there are people sent to washington that are trying to stop a freight train

headed in what they feel is the wrong direction. i don't know if washington is broken or gridlock is the last thing we've got going for us from trying to keep u.s. ending up where we don't want to be. >> the governing body of government reflects really how broken government is, quite honestly. i don't know why anybody would expect -- i don't know too many people that think government is particularly effective or efficie efficient. >> so by definition government is stuck and when you've got a country this divided about which way we want to proceed, you know, when we've got these entitlements that people love entitlements but we way overpromised. and you know, there are people that don't want to give up any of them, there are people that feel we're not going to have any entitlements if we don't reform. >> that's literally true. >> we're going to dig into this a little deeper because we have both these gentlemen with us for the next two hours. in the meantime we're talking more about the recent wall street rally. it's hit a little bit of a speed bump offer the last few sessions. joining us on the "squawk" news line is marc faber, managing

editor and publisher of the gloom, boom and doom report. one of the key takeaways is that you don't think the asian stock markets are going to necessarily do very well in 2013 and as a result you're trimming back your exposure to some of them. what do you think is going on and which markets in particular do you think will not perform as well? >> well, what i basically said is that markets that had performed extremely well since the lows in march, 2009, in other words malaysia, indonesia, the philippines, thailand, they are not going to do particularly well in 2013. on the other hand, if i look at the kind of money that is sloshing around the world, i think investors will look at markets that have performed very badly such as vietnam, china,

and also japan until recently, and that money will chase from some of the high valued markets to these markets that had a horrible performance. as an investor if you need to own stocks, then i think vietnam, in china, in japan, i think particularly in japan, and maybe also in ukraine, and would avoid the markets that have performed spectacularly well. >> is that just a bunch of what goes up must come down or what goes up won't continue to go up? >> well i'm negative about 2013. i think we had a huge run-up in stock prices from the lows in march 2009. the valuation in asia are not particularly priced compared to say zero interest rates on deposits with the banks.

and less than 2% yields on ten-year treasury. but at the same time i think there has been a deceleration in the technicals of the markets and so i'm relatively cautious about 2013. but having said that i also pointed out in my recent report we have so much government intervention into the free market it's very difficult and that has always been the case. very difficult to make any predictions about the future and some research papers show that forecasters are at often wrong as they are right. so in other words, you can't predict the future. but when there is government intervention you can predict it even less. >> you know, it sounded like you almost, there's a little bit of a caveat. you said that you would be buying in markets like vietnam,

china, and japan, if you had to own stocks. are there other assets that you like more? >> well actually, i don't particularly like any assets at this stage. i mean i a diversified portfolio, i'm not liquidating anything but i have a lot of cash. i just feel deeply uncomfortable, "a," about the future economic position of the world, "b" about the geopolitical situation in the world, and "c," about social unrest in different countries. >> so if you keep it in cash, though, that's taking a bet on the currency itself. >> correct, you're right. well, i am reasonably confident that the u.s. dollar will not collapse right away. that it can actually rally somewhat. i have some reservations about

the u.s. energy positions and that the u.s. dollar will rise strongly against that. but i don't think that the u.s. dollar is the worst currency outside the euro. but i happen to also own gold i don't think it will go up right away and maybe we still have a correction of another 10% or so on the downside. i just think that government will print money and that there will be competitive devaluation, and so i want to have gold as an insurance. >> wow. but, am i right to read on that that you deem the u.s. dollar as the, you know, the best place to be in terms of currencies? you don't think -- >> i suppose. i mean, i also own singapore dollars, the singapore dollar is probably very good currency to own, down through my exposure to use the currency.

but, i don't think that the euro is now a very desirable currency to own. and do we have a lot of problems as senator ron johnson explained just now, in the u.s., but we have the same problems, or even more in europe. so in the beauty contest of the ugliest currencies, the u.s. dollar is not winning. it's okay. and i think i'd rather be in dollars at the present time, than say euros. >> marc, that's fascinating stuff. we really appreciate your time this morning and we will see you on camera again very soon. >> yes, i hope so. >> thank you. >> thank you. >> bye-bye. >> the other big talker of the morning, aig reportedly considering whether to sue uncle sam over the terms of the insurer's bailout. "the new york times" reporting on the front page of the paper this morning that the company's board is going to be meeting tomorrow to consider a $25

billion shareholder lawsuit against the government. the suit deals with the nature of the rescue. but what became -- what became of that 92% stake in the company, the deal's high interest rates and the funneling of billions of the insurer's wall street clients the lawsuit says these terms deprived shareholders of tens of billions of dollars and violated the fifth amendment, which prohibits the taking of private property for public use without just compensation. a former ceo greenberg is pitching aig to join the suit. greenberg was ousted by the board back in 2005 but is still a substantial shareholder in the company as we were talking about in the last hour, chances of aig actually bringing this suit seem to me to be quite de minimis simply because they're now out with an ad campaign saying thank you, america, we paid back our money. how can you then go back and turn around and sue? the flip side is, if you don't participate in the lawsuit, and somehow greenberg happens to win you expose yourself also to shareholder lawsuits. so that's on the table today. we will see what happens

tomorrow. before the particle 2% chance, after the article maybe a 1% to 0% chance. here we are. >> coming up next, guest host senator ron johnson and cato president and former bb&t ceo john allison talking about the debt ceiling and more. here's a look at the futures. narrowed the loss down a couple of points on the dow. comments, questions? send them to @squawkcnbc on twitter. follow the show and look for updates from andrew, becky, joe and the "squawk" staff. "squawk box" on cnbc.

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welcome back, everyone. shares of vodafone this morning rose in europe after verizon ceo said that it would be, quote, feasible to buy out vodafone's 45% stake in verizon wireless. some analysts say that a deal could be worth as much as $100 billion. however, there's a report this morning saying a direct purchase of the vodafone stake of verizon wireless is unlikely because of tax consequences for vodafone. >> all right. real quick m&a guy having covered that, about ten years, we've all been waiting for that deal to happen. never going to happen. >> let's get to our guest host senator ron johnson is a member of the commerce and budget committee, and john allison is a former bb&t ceo. now the new president of the

cato institute. senator, you know what the inner workings are going to look like for the debt ceiling. what are your colleagues saying at this point? we've got -- we've got the other side saying it's not going to be about spending cuts. we need another whatever $2 trillion. they want to go 50/50 again. they want another trillion dollars, and so they got the higher marginal rates. they're going to want to do the other thing now. tax reform by closing loopholes, but not revenue neutral tax reform. but to raise another trillion dollars. will republicans go along with that? >> well, first of all, from the republican standpoint i think our thoughts are that president obama got the revenue portion, the tax increase portion of his balanced approach. he got $600 billion, plus we also have to keep in mind we've got $1 trillion worth of tax increases on obama care. by the way, those are middle income tax increases. they're indirect, but they're going -- >> he's not going to agree with that. he's going to say i was at 1.6

trillion and then i made a concession to 1.2. >> it's pretty jaw dropping when he says he's not even going to debate the debt ceiling. yes, he is. he's going to have to. any time the president of the united states comes to congress and wants the authorization to increase the debt burden on our children and grandchildren, that's a debate we should have. my guess is we're going to have this ongoing debate time and time and time again, because i don't see a grand bargain occurring. i mean i just don't. i wish there was. but i don't think this is going to be solved withs 09-yard hail mary pass. i think this is going to be a ground game, 3.5 yards. a lot of blood, sweat and dust. so this is going to be the argument going forward four years. how do you restrain the rate of growth in government? and like your previous guest was talking about. i certainly come from the position i think john would agree with me that the root cause of the problem is the size, the scope, and the cost of government. and government creates high level of uncertainty. let's face it, business is hard enough. there's enough uncertainty just

competing in a marketplace, much less, you know, what government throws at you, with increasing taxes and regulatory -- >> government is back. back in vogue. 2008 we usher in hope and change. beautiful. it was beautiful. hope and change. by 2010 the tea party swept in on the biggest gains we've seen in years and years. there's a totally different feel. by the time 2012 came around we were back to obama care is going to be the laugh the land, entitlements are growing, and we know, you know, obama care, not only is medicare already a huge entitlement, obama care just doubled down on all of our entitlements. people voted for it. and people voted for government. you're running the cato institute right now. what's 2014 going to look like? and what can cato institute do to try to, i don't know, orchestrate some type of a comeback for your side? >> we're working on that very hard. and the idea we have to do is convince people that the

consequences of these policies are incredibly destructive, particularly for their children and grandchildren. >> totally fell on deaf ears in the past election. >> but we have to keep fighting that fight. unfortunately it's going to be a hard message to get through. because i don't think we're going to fall off the cliff. >> i would love -- >> look, let's say last night maybe i wanted notre dame to win because of -- for whatever reasons just maybe i shouldn't have. because maybe it wasn't very realistic. but if i could, take the side of the team saying, we're going to nail 10% of the people and we're going to promise a bunch of stuff to the other 90%, i would go with the 90%. i think they can get more -- i think it's easier to get 51% out of the 90 than it is to get 51% out of the 10. and i just, i would short your efforts right now, john. >> well i think it's a real struggle. but i don't think it's one we can give up on. because it's a huge -- i think it's the future of western civilization. these policies we're

implementing today don't work. they've been proven to fail in history. countries have fallen over and over again -- >> there have been periods like this before, john? we've never had this many people on the receiving end of government in the united states. >> not in the united states. >> no. >> but i think, i do think that the republicans need a real message that's a more libertarian message. it's hard to know whether obama won over economics or whether he won over social policies. >> that everybody gets to use their own -- >> there's a lot of -- >> i understand. >> simpson bowles, alan simpson and erskine bowles, bipartisan group, they have been trying like mad to get people to pay attention to this message. they're out against today. they're going to have another time-out and the fiscal message, the bipartisan fiscal message doesn't seem to be picking up speed, even though they have been out there working their tails off to get attention. >> i think it's a hard fight. but i don't see how we can help but fight it. i do not particularly think, and my efforts have always been directed at policy who have a huge investment in this and are open to new ideas. what you see in colleges more

and more, they're still a minority, even though the majority of them voted for somebody like obama, a lot over social issues, they're starting to understand the long-term consequences and are open to, i believe, the libertarian ideas versus traditional conservative ideas. >> you feel like mcgovern did at the end of the second reagan term. the liberal ideas were about as popular then as conservative ideas are right now. >> part of the problem is we just ran an election about $7 billion was spent, and what information did we get out there other than president obama and the american people basically saying that 2% can carry the burden. they can solve the problem. it's not going to solve the problem. >> we're going to continue this conversation. coming up cohen and company voice chairman thomas strauss is going to join us to discuss what he's expecting from the markets in 2013. plus how is small business feeling about the state of the economy? national federation of independent business is going to be releasing its latest survey and we've got chief economist to break down those numbers. at 1:45, the aflac duck was brought in

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now the answer to today's aflac trivia question. which two teams played the first-ever intercollegiate football game? princeton and rutgers university in 1869. >> yes, rutgers won that. we do have some breaking news. kate, bring us up to speed. >> interesting news out of blue mountain capital management the $12 billion hedge fund. they are hiring jeff daly, former investment bank ceo of jpmorgan. he served that role for three years and stepped down from it late last year. he's going to be joining blue mountain which was founded by former jpmorgan folks, notably ceo and cio. couple of interesting things about this, he has asset management experience. he ran the asset management unit within jpmorgan and was

responsible for their highbridge deal. he's very experienced in this area. the other thing blue mountain in a year where hedge funds had a lot of tumult, a lot of tough performances and redemptions in one sense actually was a huge winner there up north of 10% in r fl fund from what i'm told and they're probably going to be expanding and considering staley to be part of the institutionalization process. and finally, you know, those two entities had an interesting relationship last year, becky, as jpmorgan got into these london whale trades, and lost six or more billion dollars. fieldstein at blue mountain was on the other side of that trade and made a profit although i'm told it was a very friendly transaction as much as these things can be. >> all right, kate. thank you very much. breaking news and we will continue to follow that as we get through the day. still to come on "squawk" this morning, some turbulence hits boeing after a fire breaks out on a parked plane.

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welcome back to "squawk box," everyone. in our headlines this morning, one of the few companies in the world to give apple a run for its money says that it will

report fourth quarter profit. samsung says it will earn about $8.3 billion for the quarter. that's up 89% from a year earlier. about 70% of samsung's profit comes from its mobile division. that's where it recently overtook apple in smartphones there. also u.s. regulators want those nice, quiet, hybrid vehicles to make a little noise. that's according to the national highway traffic safety administration. those cars don't make enough noise which presents a danger to pedestrians and cyclists. the proposed rule would require noise when the vehicles travel under 18 miles an hour. and the greek prime minister is meeting with german chancellor angela merkel this morning. he's in berlin to update german officials on recent progress, battling its debt problems. he told reporters that his country is delivering on his promises. >> and the nfib's latest read on the economy and small business is out. senior economics reporter steve liesman joins us with the details and a special guest. >> thanks very much, andrew. following the second biggest decline in the history of the nfib survey the small business

optimism gaining a scant, wait for it, half a point in december. the decline in november worse than what followed 9/11 and just a tenth better than what followed lehman in 2008. the only good thing you can say is the survey was done before the fiscal cliff deal. so maybe there's some chance of a bigger bounce in january. there's that little bump right there. you can see the decline. the 6.2 point decline. the nfib index was up 0.5 points in december to just 88. 88, by the way, still one of the lowest in the 38-year history of the index. joining us now, the guy who puts all this together, and is not afraid to put his face to the data, bill dunkleberg. bill, this is one of the most pathetic increases i've ever reported on in my history. how can you call this an increase? >> well, you know, it's not a decrease mathematically so i guess we'll call it an increase. you are right professor liesman, it's bad news. you know, we needed to see

something better. but again, you know, not a whole lot happened. there wasn't even a great deal, you know. so i'm not sure what the cliff solution is going to help. but congress took us right up to the bitter end. everybody was thinking nothing would happen. disaster would happen. >> yeah. >> and that's what we got in the data. >> but we're looking at a list of what went up and what went down. i don't think it matters. i went through this in great detail. the one point up, the one point down are all from this very low level. and i was really just amazed at what happened in december, or sorry, in november, was equal in the mind of small businesses, to 9/11. it was worse than that. and just a little bit, or not quite as bad as lehman brothers. >> well, that's right. you know, and they're looking at the whole economy, i guess and saying, this is bad news, you know, and looking ahead they're not very optimistic about where the economy's going to be going. you got 45% of the owners think the economy, the business conditions will be worse six months from now than they are, you know, than they were at the

end of the december, anyway. that's not really very optimistic. that's only 10% thought it would be better. so nobody's going to hire. nobody's going to spend. everybody's going to sit tight. that's what they're doing. >> that's the other thing worth pointing out. because a lot of times in these surveys you get people who assess the current situation as negative but they don't lose hope for the future. you see that a bit in the consumer confidence numbers. but not here. the pessimism is both about the current situation and where we're going. bill, when you drill down into what exactly is troubling small business, what do you guys come up with? >> well, we ask them about their most important problem, of course, and 23% said taxes. no surprise there. that was the big issue. 19% said weak sales. that's down a few points. and 21% said regulations and red tape. only 1%, that's a record low number, said financing is their top problem. there's no issue there. >> bill, when you look at these numbers, what do they portend

for hiring in the months ahead and what do they portend for economic growth overall? >> well, the net percent of our owners who said they plan to create some jobs, that is increase total employment, fell from 5 to 1, that's pretty low. didn't go negative. but that doesn't look like a lot of job creation there, job openings fell a little bit. so, it doesn't look very strong. and, again, given their expectations for sales, they probably aren't planning to hire anybody, because they're not expecting the customers to be there, and don't have to take care of them. >> so if you put a number on it, bill, is it a 2% economy? is it a 1%? is it a zero? >> i'd say it's the high 1s, maybe close to 2, where right in that territory. >> bill, thanks for joining us this month and we appreciate you coming with the data, no matter what it says. >> thanks, steve. >> data says -- >> i'll go back -- >> i think it could go either way. >> okay. another big talker this morning, sears announcing that ceo louis d'ambrosio is going to be stepping down early next month

citing family health reasons. chairman eddie lampert is going to be assuming the role of ceo in addition to his current role. as of november 30th lampert's hedge fund had a 14.1% stake in sears holdings. shares of sears during the last year, down to 44. up actually in premarket. over the ten-year period, not a great situation. over a five-year period down close to 60% at a time when you look at target and walmart up nearly 50% during the same time period. and eddie lampert was the ceo briefly of this company before, and he's been criticized in large part because of the failure of his company to really re-emerge, the transaction, original transaction between kmart and sears putting these things together, but never really being able to get the next -- take the next step. >> we talked to him, too, how long ago? >> we talked to him -- remember about richard rainwater. one of those great shows. he came on to talk about richard rainwater. >> but he did talk a little bit

about retailing. >> he gets retailing but he's not -- he's not necessarily a retailing ceo. so the question is going to be how long is he the ceo for? who do they bring in? these are all the open questions. >> and the question's always been what kind of investments he put in versus what you can take back out. >> remember when they did the original transaction everybody thought this was some kind of real estate deal. that's what this was supposed to be about. >> years and years have gone by and they are still a retailer. >> they are still a retailer. interesting on the good news category, i think i splay mentioned this before, online their year over year, something like 20%. they're actually doing better online than they are in the stores and that probably mirrors how the world is going. >> all right. checking the futures at this hour, not a whole lot of action so far this morning. now, down about five points. or so. after losing 50 or so. but a great week last week. still to come on "squawk box," second time we said this, i guess, you know, turbulence for boeing after a fire breaks out on a parked dreamliner at boston's logan airport.

still to come, after a strong start to 2013, investors took a breather yesterday. find out if this rally still has legs, or if the market just ran out of steam. "squawk box" is back in just two minutes. where is flo? anybody know where flo is? are you flo? yes. is this the thing you gave my husband? well, yeah, yes. the "name your price" tool. you tell us the price you want to pay, and we give you a range of options to choose from. careful, though -- that kind of power can go to your head. that explains a lot. yo, buddy! i got this. gimme one, gimme one, gimme one! the power of the "name your price" tool. only from progressive. sven gets great rewards for his small business! how does this thing work? oh, i like it! [ garth ] sven's small business earns 2% cash back

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welcome back to "squawk." our next guest says liquid investments are key successful investing in the current climb. joining us tom strauss chairman of the $12 billion fund to fund and vice chairman of the cowan group. what do you mean by that? >> well, i think investors clearly the growth of liquid alternatives presents them with opportunities that they've not had before. previously if you wanted liquid portfolios, you owned stocks and bonds, and today the growth in liquid alternatives is significant and gives investors an opportunity to diversify their exposures. >> okay. but what about the issue of fees? traditionally in the investments you're talking about the fee structure is so much higher, at a time, by the way, when so many other people seem to be going the exact opposite direction. >> as the business grows, fees

are more competitive. you talk about 1940 act, mutual funds and i think there's a modest premium for the smaller investor. but it's pretty reasonable. and there are competing products, and we're going to see fees under some pressure. >> can the retail investor that's watching "squawk" now get in to some investments? >> yes. >> that's always the big issue. >> that's a good question. >> and oftentimes it's not that you can't get in -- you can get into a fund run by a great manager but you can't necessarily get into the fund that's outperforming. there's almost like a separate fund you hear about that's not doing nearly as well as the original fund. >> i think when it comes to funds access is very open, and any investor can get into open funds. it's not like hedge funds that, you know, can be more selective for the rich investors they want to take. >> what's your sense on where we are in the markets right now? >> oh, i think the markets vary. concerned.

confidence is at a low level. i think if we're going to turn this thing around, clearly, it's all about confidence. and i think we saw in the november election that the voters voted for attention to the fiscal cliff problems. they were not addressed appropriately at the end of the year. we just kicked the can down the road. and if you think about confidence, it's all about hundreds of thousands of little decisions that get made by consumers, and businesses. >> right. >> all over the country. >> are you a buyer of this market or not? >> i think fixed income prices are high. yields are low. i think vulnerability in fixed income, you could go for a couple of years. take the coupon, take capital depreciation and you could earn nothing. >> equities? >> i think equities are probably at a reasonable foundation and

you're going to see bond money move into -- >> what are you doing with your money? >> that's fair. i own almost no bonds. and don't believe in them. high yield bonds have had a huge run. you look at the return in high yield bonds last year, half of it came in coupons, half of it came from compression. that can't continue. so i think high yield bonds have pretty much run their course. which means you have to look at other alternatives. you look at world class global companies, you want to own some of those. >> i am with david faber on this and he was telling the world. >> i think there are very serious global economic problems. unfortunately i think what's driving the stock market is what the fed does. if it keeps printing money, it's got to go somewhere. until we have some really bigger negative consequences or dramatic thing around the debt thing, the market will probably keep going up. although it shouldn't. certain long-term economic sense but i think the market is driven by traders right now and traders

say, well, if the fed keeps printing money it's going somewhere, and stocks is one place it will probably go for awhile. >> and for people who are looking towards retirement after just saving and trying to save some money up, i know, senator, you've been looking at where that money would have gone if it wasn't going into social security. >> right now, i do spread sheets. i do the spread sheet and just made the assumption, if you took the payroll tax from an individual that's retiring today, they put that into just an index fund in the dow jones, not even counting the dividends and pay the maximum payroll tax amount they'd have an asset worth $1.2 million versus that present value they're expected social security benefits, about $255,000 if you discounted 7%. now, it hasn't been a very good deal. >> we get people who write in and say that, look, the social security, you can talk about cutting benefits. this is my money, i put in for it and i want it back. how much do you put in versus how much you want back? >> social security they're not getting a very good deal. it's medicare that they're

getting a really good deal. they're putting in a little over $100,000 and their expected return is about $350,000. i mean, last year we spent about $1.25 trillion on social security and medicare but the payroll tax only brought in about $850 billion. >> was that because of the cuts that social security -- >> that was about $100 billion of that. but still, so we underfunded those programs by about $400 billion. so in other words we paid out 50% more than we brought in. these programs are unsustainable. and that's really what we have to start addressing. how do we reform those entitlement programs so they're available for future generations? that's what this president must lead on, and he hasn't brought any leadership to date. >> thanks for being here. >> pleasure. >> appreciate it. >> no, no, we're still on tv. >> relax. >> come on back. >> up next, should boeing customers be concerned about safety issues after a fire breaks out on a parked plane at

boston's logan airport? cnbc's phil lebeau has that story next. and check this out. silvia, john, keon, emerson blake and palmer. it's bill emerson and john rogers our lineup for the next hour to guide you through today's trading today. tell you where to put your money and what's working now. "squawk box" is coming right back. ♪

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comments about the airlines this morning. the firm is upgrading shares of southwest to a buy from hold saying the company has turned the corner on the air tran acquisition at the same time deutsche has lowered its rating on jetblue to hold from buy. it's expecting only modest earnings growth this year. >> okay. a fire breaking out on a parked boeing dreamliner at logan airport in boston sparking concerns about safety issues. cnbc's phil lebeau joins us now with more on this story that's riveted at least me and i know so many other people who have been very interested in this, phil. >> it was interesting, andrew. i just heard from carl quintanilla. he tweeted out for one of the hosts of marketplace on npr that his flight this morning, dreamliner flight tokyo to l.a.x. has been canceled. now we don't know why or if that's just something separate related to safety concerns but a lot of people are saying what's going on with the dreamliner.

is there a problem? in part because of what happened yesterday in boston. any time you mention fire on a plane, it's going to make a lot of people nervous. the ntsb is now investigating the 787 on the tarmac at logan airport yesterday morning, catching fire, after the plane had landed. the crew and the passengers had all deported. the fire was found in a compartment with batteries and electrical components. and again the passengers and crew were not on board during the fire. but this is the fourth incident since november or since december 4th where we've had a problem with the dreamliner. now remember united had its first domestic 787 flight back on november 4th. just a month later united had a flight from houston to newark, it made an emergency landing in new orleans. after experiencing mechanical problems, a loss of power. qatar air on december 9th said it grounded one of its 737 -- or 787s because of a faulty generator. similar problem, loss of power in flight. and then on december 14th, united grounds two of its four dreamliners due to problems with an electrical panel and then

finally, yesterday you have the emergency crews responding to a 787 fire at logan airport. now the dreamliner, and this is of particular concern to people, it uses lithium ion batteries to power the onboard electronics. now the faa issued special rules in 2007 when it comes to lithium ion batteries and their use on planes saying in general lithium ion batteries is significantly more susceptible to internal failures that are result in self-sustaining increases in temperature and pressure. the metallic lithium can ignite, resulting in self-sustaining fire or explosion. again, that's the faa back in 2007. take a look at what happened with boeing shares yesterday once these reports came out. stock took a huge hit. down 2% at the end of the day. and then when you take a look at boeing over the last year, some are going to say listen, it was due for some sort of a pullback and this was just the catalyst behind it, but there's no doubt, andrew, that the ntsb is looking at two things right now, the electrical issues that boeing

787s have been experiencing, and the reports of loss of power not only from united and qatar and then also this fire being in the electrical compartment yesterday. but also the lithium ion batteries. was this fire caused by those batteries? or was it caused by an electrical issue and then that caused the batteries to then have a problem? that's what they're investigating right now. and remember, this is a long haul aircraft that goes over the pacific ocean, the atlantic ocean. that's what it's designed for, to connect midsize cities. it's not like you can say well we need to bring the plane down, we're in the middle of the pacific ocean. that's of particular concern. >> that's what i was going to ask, phil. if this had happened actually in the air, what would have happened? >> well, they would have brought it down as quickly as possible. i mean, when they had that emergency landing in new orleans, they brought it down in part because they had a loss of power, and the pilots, if i'm not mistaken, reported well, you know, is there a potential fire here? they never reported that there was a fire. let's be clear about that. but they wanted --

>> in this case you're saying yesterday i thought there was a fire. there was not a fire yesterday? >> we're talking about that new orleans emergency landing. yesterday there was a fire. what happened is, it was on the tarmac, the crew and the passengers had left, a mechanic was doing a walk-around on the plane, noticed what looked like some smoke down in that compartment in the auxiliary power unit. that's when they called in the fire department and there i see pictures of what's happening when they were putting out that fire down there in the auxiliary power. >> clearly that plane is now going to be taken out of service. for how long is a plane like that going to be taken out of service for? >> i think it depends? the first order of business is how quickly will they be able to assess exactly what caused this fire? that's the first issue. once they have that, then it becomes an issue of how quickly they can repair this. >> now there's the larger structural issue which is that these planes use the lithium ion batteries as opposed to what i can understand, you can explain it better, traditional planes use the actual wind generation that goes through the engines to power the planes? >> right.

that's the bleed air. and that bleed air usually does everything from controlling the environment within the cabin, the heating and the cooling, onboard electronics. what makes the dreamliner so different, so unique, is the amount of innovation that's gone in to using these lithium ion batteries in order to run the electronics on the plane. well, part of the problem here is, you're taking an amount of electricity that is coming off of these generators, in a very confined and small space, andrew, i mean this would be different if you were in the middle of a power plant. you'd say no problem. companies do this all the time. now you're trying to do this inside of an airplane. we should point out, this has gone through certification at the faa, repeated testing. it's not like they're just throwing these planes up there and there hasn't been any kind of safety checks. they went through extensive tests. if the issue now is was there, and this is something i think we're going to hear about in the next couple of days, is there a specific, perhaps malfunction with some of the electronics and electron ig panel, and specific

part that was provided by a supplier. i think that's one of the things they're going to be looking into. >> we've got to go. fine point on it is there any possibility that the faa would decide they'd ultimately have to retro fit the planes and decide, we're not using batteries or doing electrical system, going back to an older system? >> i -- >> you're watching -- >> i can't say that there's not that possibility, andrew. but i think given the amount of testing that was done here, i think we're several steps away from that happening. >> okay. phil lebeau, thank you for that. as we just mentioned, stock is off. >> about 1.5% on a day when the market overall is looking flat. so this is having some impact on the stock this morning. when we come back we will have more from our guest hosts senator ron johnson and john allison. plus we're going to talk mortgages and the housing market with ceo of quicken loans bill emerson. find out if now is the time to buy, and where rates are headed. "squawk box" will be back. ♪ [ male announcer ] how could switchgrass in argentina,

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at the start of the year, markets look ready to take off. >> reinforce the takeoff jamp? >> no, we didn't have time. >> yesterday the rally stopped short. >> oh. >> can pulls take charge or will uncertainty in washington keep

money on the sidelines? >> plus, a portfolio planning session. our what's working now series continues with aerial investment ceo john rogers. >> and a read on the housing market. >> that's our offer, andy. we want it all. >> the ceo of quicken loans is going to join us on the company's record year and the outlook for the home mortgage industry. the third hour of "squawk box" starts right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. our guest host this morning, wisconsin senator ron johnson. and john allison, president of the cato institute and a former chairman and ceo of bb&t bank. we'll have more from them in just a minute. first becky has your morning headlines. >> that's right, joe. let's start with what the market is doing. the s&p retreating from the

five-year high yesterday although stocks did finish off their session lows. you can see this morning that nings have barely budged as people kind of wait to hear what's happening with earnings. tonight we get the very first of those reports from alcoa and the first of the big reports. people are going to be looking at the guidance that all these companies are giving. that's what the real story is. how confident are ceos once we've gotten through the fiscal cliff that we still have that debt ceiling hanging over us. overseas in asia, you did see some losses from some of these major markets. the nikki was down by 90 points. hang song by 218 points. also in europe at this hour green arrows but these are modest gains at this point. the dax in germany has barely budged. in france the cac is up by about 20 points and the ftse 100 up by ten points in london. also, aig is reportedly considering whether to sue the u.s. government over the terms of their bailout. "new york times" reports that the company's board will be meeting tomorrow to talk about joining a $25 billion shareholder lawsuit against the government. the suit deals with the nature

of the rescue, at what became a 2 92% stake in the company. the lawsuit says that these terms deprived shareholders of tens of billions of dollars, violated the fifth amendment, which prohibits taking of private property for public use without just compensation. a little bit of crazy lawsuit because it happens when aig just paid back all of that loan and is launching a public relations bid and saying thank you to washington for bailing us out. so this is going to create quite a bit of noise. former ceo hank greenberg was ousted by the board back in 2005 but is still a substantial shareholder in the company. again some weird things that are happening. to me it seems ridiculous they're going to take a huge black eye for even considering this. although they may have to do it for fiduciary reasons.

>> i don't think they will do it. even though i think there are fiduciary obligations. i do not think that aig needed to be bailed out by the u.s. government. they could have easily gone into normal bankruptcy, reorganization procedure. it would not have taken out the insurance market because their subsidiaries weren't in bad shape. >> shareholders would have been wiped out. >> possibly. possibly. or some of them could have ended up in some kind of subordinated debt issue, which comes out of some of the -- depends how bad of shape they were in. you really can't answer that question now. >> the company took the bailout? >> shareholders. >> and the knock-on effects to all of the other banks that were being protected by aig were -- would have been potentially exposed. >> i think it would have hurt some of those organizations. but i don't think it would have caused any of them to fail. goldman sachs is a classic one. why would the u.s. government want to bail out goldman sachs? >> i think goldman might have been one of the few that would have been fine. you start listing the european banks on the hook, and knockdown

effects it becomes a little bit more questionable. >> why would the u.s. government want to bail out european banks? that's not exactly -- >> we're on the other side of the european banks. it's a global system. >> i do not believe that would happen. i do not. >> i was involved in doing all this stuff and we -- capital markets were working. >> capital markets were working in september of 2008? >> they were working until we announced the t.a.r.p. program. that's what closed the capital markets because people then that created -- >> we're going to disagree on this because i think the facts are different. i think the capital markets, i think they fell apart in the fall of 2008. >> not -- >> were incredibly -- >> it was if you were a high risk institution. if you were a healthy institution we were getting buried with cash. it was a huge transfer of wealth to healthy well-run company. it was a natural correction that happens in markets. we would have gone deeper and we'd be radically better off today. >> there were major companies that could have had issues

meeting payroll because of the freeze june of some of these markets, too, though. >> could have been. but i don't think so. cash you've got to remember this was not cash was coming out the fed was printing cash like crazy, making runs to financial institutions. a lot of what they did was unnecessary, and was also part of a process that created -- i went through 1980, went through 1990. we didn't have -- >> we're going to talk -- >> we didn't have that panic. >> what do you think about this? >> the bond market was completely frozen. no trading was taking place. none of us liked what the government had to do. but i would argue that if we hadn't stepped in, remember that was one week after lehman brothers that aig was rescued. action needed to be taken to keep financial markets -- >> -- with this commercial paper? >> not enough. the bond market, the entire united states bond market -- >> what about commercial paper plus fdic. >> we could talk about -- >> commercial paper with money markets? >> we were in the midst of a full-blown panic, and it's my

view, and i think your book shows the facts of what actually happened. >> all right. >> aggressive action was necessary to prevent the system from collapsing. >> we created a panic by how we handled it. we let bear stearns fail early on, lehman would have gone a different direction. other institutions. and if we had a plan, it was the random -- >> i'm not going to disagree -- >> -- change the facts leading up to it who knows what would have happened. >> i won't disagree with you if you handle bear differently, i think given the way the dominoes fell the options were limited. >> because -- >> we're reliving history. >> because we caused -- we made an unnecessary crisis. >> if you were a board member of aig and going to this meeting tomorrow your answer is that you're not taking -- >> i don't think they can -- the public relations would be awful. >> and what happens if hank greenberg actually pursues the case and wins? >> then you have to deal with that when it happens. >> you're going to be sued. >> you're going to be sued and you'll have to zeal with that

when it happens. >> two bad choices. >> right. >> let's talk about another story this morning. sears announcing ceo louis d'ambrosio will step down early next month citing family health reasons. chairman eddie lampert is going to be assuming the role of ceo in addition to his current role. as of november 30th, lampert's hedge fund had a 34.1% stake in sears holdings. where it's come since 2004, big climb up and climb back down. >> read on the markets, on set is ed keon. portfolio manager at quantitative management associates a unit of prudential where he's toiled for years. and john silvia is wells fargo chief economist. i'll just start with you because i want to know what your forecast is for, not funny, what your forecast is for 2013, in terms of gdp for the year. >> continued economic growth. somewhere around 2%. i liked your earlier lead-in with quicken loans. because you're talking a little bit about housing coming back. when we look at the capital markets, again, a discussion

point you had just earlier, high yield, high grade bonds, leverage loan finance, asset backed securities for auto lending. all strong. i think the financial side, joe, is really giving a lot of support for continued economic growth. >> it's 2% -- 2% doesn't, you know, doesn't get me excited. what about 2014? >> well, 2014 probably even a little bit better. i think there is a constant ongoing mending of the financial and economic system. >> but you're happy. you're sounding like you think 2% is okay? >> i think 2% is okay. because i think when you look at the reality, joe, 2% is what we've had now for the last three years. and i think 2% is what we have to deal with in the u.s. economy. but it certainly isn't a downdraft. it's not a recession. >> no. >> we're not doing a double dip. i think we're moving forward and i think that's important. >> you like 2%, ed? i mean i guess that's what we're stuck with. >> i think 3% is more like 1%. i think the upside potential is

greater than the downside. it will be a fiscal drag because of the tax increases. but if you look at the momentum we had on the housing market, look at some momentum in the job market. it's not great. but it is getting better. hours worked are up. wages are up. payrolls are up. not at a great rate but we're starting to gain some traction. >> i guess what we're getting at, there are still people that think that obama care and other what they feel are misguided policies are holding us below plan. are we permanently held below our potential as a country? to grow at 2% it would do so much if we could do 3, 3.5%, 4% in terms of we wouldn't worry about government spending as much. we wouldn't worry about the revenues would go up without raising taxes. there's so many positive things that would happen. >> that's all true, joe. that's all true. >> but we're not getting it. you're hoping -- >> we're not getting it. >> you're hoping for 2%. >> we have to deal with the 2. >> why? >> what we have is 2%. >> why do we have 2% because of the hangover from the financial crisis or because of misguided

government policy? >> again, going back to an earlier theme you had this morning a lot of uncertainty out there. it's very hard to do long-run investing, long-run developing in terms of the lab market if you don't know what policy -- >> so what about a grand plan? would a grand plan, some type of big deal, would that free up, would that allow us to grow at 3%, 3.5%, 4% again? >> i think if you were dealing also with entitlements, in that grand plan, my answer would be yes. >> so that's what we need. >> well, i see the grand plan would be great. but the strength of the economy, and the financial market does not come from washington. it comes from the innovation -- >> why? washington is certainly getting away we've seen in the last couple of years. >> on business people and entrepreneurs is not nearly as great in my view. last year, the big theme was uncertainty, how many times we talk about uncertainty on the set. now we have certainty. we may not like the certainty that we got. >> two months. >> but now we have a better sense of what's happening. business is always uncertain. it's not like the normal state of business is going to know

exactly what's going to happen. i think that the momentum of the economy, not just the united states, but around the world, is starting to improve, and it's the private sector, that's always been the key driver. the drag from the financial crisis is slowly ending, and i think this year is going to be a little bit better than the last couple. >> i'm not arguing with you about the private sector. but the private sector needs to be able to do what it wants to do without -- >> and longer than two month horizon, too. i mean it's going from january to march. >> i think also, here's another simple fact. i think the best tax code we ever had in the united states was the 1986 after the second reagan tax cut. >> agreed. >> the growth in the economy since then has actually been slightly lower than the growth in the same period before that. even before the financial crisis. my point is simple. the impact of taxes and tax rates, although they're important, are not critical. they're not do or die or the economy. i could say that just based -- >> the '86 tax code didn't last very long --

>> i agree. but the impact on the economy, just look at the numbers, is not nearly as dramatic as we would think sometimes. >> we have 30 years of added regulations as well. did you just see the small business report? that's a terrible report before a half million additional businesses are going to get their taxes dramatically increased. that's going to reduce the demand for those businesses that didn't get their tax increased. >> i've been a small business, people will react to sales. when they start having customers coming in the door, that's when they'll start to hire and spend money. my opinion, they haven't had that much so far because growth has been slow. >> it's chicken/egg thing. now the guys argue his point would say that's why demand is down as well. >> housing has really changed the margin tremendously in the last six months or so. also the global situation is not nearly as big a drag now as it was last year. so, not great, don't get me wrong, but i think we will see some traction this year. >> but 2% in 2013 and 2.1% in 2014? that's great, john.

2.2% in 2015. that's gang busters. >> that's what you've got to deal with. >> 2%? really? i want 4%. >> i want 4%, too. but the demographics of american labor force are great different. >> all right. gentlemen, thank you. ed keon, john sylvia. all right. >> coming up the pulse of the mortgage market 2012 was a record year for quicken loans. the company closing more than $70 billion in home loans. we're going to talk to its ceo bill emerson after the break. are your investments -- is your blow yo badly in need of a booster shot? >> ow! that's awesome. >> john rogers is here with his best investing ideas as part of our what's working now series. what are you doing?

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welcome back to "squawk box." this morning you see some red arrows there as we see how the market's shaping up before the open. dow looks like it would be off about 25 points. s&p 500 off 25 points.

the nasdaq off close to 4 points. john paulson's flagship advantage fund made up some lost ground in december. fund chalked up a 3.1% game during the month trimming its four-year loss to about 14.3%. still not great. most of paulson's other funds did have positive decembers, as well. paulson's gold fund slid another 5% last month and was down a total of 24.6% for the year. also in the news the federal government's consumer watch dog set to unveil new home lending rules this week. "the wall street journal" reporting the move could potentially reshape the mortgage market by ushering more standization preventing a return of the exotic loans that powered the housing bubble. there will be standards all mortgage lenders are likely to follow. the new rules are expected to be contentious because they will determine the types of loans that banks are going to be offering as well as to whom and on what terms. there have been concerns the new regulations would restrict credit and make getting a mortgage too hard.

i'm sure some of the gentlemen around this table have views on that, as well. >> that's right. in fact for more on the mortgage market we are joined by quicken loans ceo bill emerson. thanks for coming in today. >> my pleasure. how are you? >> great. we've been talking about the mortgage market. not only the story andrew just mentioned but both of our last market guests pointed to the idea that the housing market is really starting to turn and that could make the difference in the economy. what do you see? >> so i think the market is getting better. i don't know if i would say it's turned. i think it's stabilized. you know, you take a look at the case shiller price index, 3%. certainly better than that going down. seeing pockets in the country where folks are starting to get multiple offers. but i wouldn't say that we are in a full-blown recovery. i do think stabilization is good. and i do think that it's probably the best time ever to buy a home because we've got low rates and you've got affordability index at all-time high. so it really is a good time to be looking in the market place. but there's a lot of analysts, you just mentioned the cftb and the new rules coming out. there's a whole lot of

uncertainty about what the future of this industry is going to look like. i think that's got a lot of people tentative right now. >> what has the government done that helped recently and what have they done that hurt? >> i think one of the things that's helped homeowners is the harp program that allows people under water to take advantage of today's low interest rates. >> that's only for people who have been making their payments all the way along which is different from some of those earlier programs? >> that's correct. you do have to be current. you have to have been making that payment. so, but there's still a lot of folks out there that can take advantage of that. i'm not sure there's a lot of people that really understand that they can take advantage of that. >> right. >> on the flip side of that is just the uncertainty around what the future of this industry looks like when it comes to the rule writing. you know, what will you be able to qualify for? what will the size of the credit box be? can you buy a home when these new rules come out? who will be impacted? and i think there's a lot of uncertainty around that until these rules get written that have been sitting around on the, you know, back and forth for a couple years. so when those come out i think you'll get a little bit more clarity. >> you know, we spoke yesterday

with someone who was talking just about fannie and freddie, rick kovacevich, the former ceo of wells fargo and he thinks we should get to the point where we don't have fannie or freddie with this guarantee from the government, what would happen to the housing market if that were the case? and could you phase it in gradually? >> so that's a great question. you know, when you look at the housing market for the past, i don't know how many years, there has been federal involvement. >> he's okay with fha. it's the fanny and freddy the explicit, implicit whatever promise there is from the government. >> we all know it really wasn't explicit because the government bailed out fannie and freddie. if it's a purely private market initially you're going to see a smaller market. when people talk about the size of the market and tightening of credit, and the recovery that you want to see come about as a result of that, you need homeowners to be able to buy a home. you want first time home buyers to be in the game.

there's a lot of concern about fha and the fund and what that future's going to look like. >> let's talk about quicken loans because you have some phenomenal numbers for the number of originations you were doing in 2012, something better than complete, 200% increase from what your previous record had been. and that's not an indication just of what's happening with this market? >> no, it's not. >> or stabilization. >> no, it's not. you know, there's been a lot of things gone into that. number one, i think a lot of the larger players changed their focus on the mortgage industry. rates were low. so it allowed an organization like ours, who focused on technology and process to take shares. so you know, for us to more than double our business from one year to the next has a little bit to do with all of those things, and a lot to do with the platform and our ability to serve as clients in a matter that they want to be serviced. >> are other banks getting out? are other lenders getting out of the idea of originations? it just -- the numbers are $70 billion was the number of home loans it closed on last year, which is up from $30 billion last year the previous record

the year before. i can't even figure out how that comes together. >> well, you know, again, i think there's plenty of opportunity for a platform like ours. centralized platform that has the ability to reach out to 50 states. and what we're able to do in that process is to keep our turn times sub30 days. a lot of the industry couldn't do that. so when people hear that and see that they come and they want to at least talk to us. when they talk to us they give us an opportunity to do a mortgage for them. so i think there's a lot that goes in to that particular piece of it. and yes, there are, you know, when you take a look at b off a they've changed their focus on the mortgage industry. wells has a big piece of the market. chase is doing okay. but you've got a lot of the bigger players that have changed their focus away from mortgages and given companies like ours and other companies a chance. >> bb&t is in the mart business. unfortunately a lot of it is refinance. >> sure.

>> and i would definitely agree the mortgage market has bottomed. the housing market has bottomed. but it's unlikely any time in the immediate future to get back to the level it was. which it shouldn't get back. because people are viewing housing differently i think. housing had become an investment. but it's never been an investment, it's actually consumption. and i think most consumers are making more rational decisions and saying i want to consume a house, therefore it should be more affordable. >> although some consumers said i'd love to make a more rational decision but i can't even get credit. >> i would also, i strongly believe we need to get rid of freddie mack and fannie may. they were one of the major contributors to the crisis we had. i'm old enough to be in the market when they were big players. down payments required were more rational. the people that were buying houses were people that basically could afford them and loss rates were very low. in sending people to overconsume which is what we did with freddie mac and fannie mae, you need the government out of the

housing market. except maybe with something that's really designed to help low income people. not something that drives the whole market. >> this is obviously a debate that's going to continue. john is staying with us. thank you very much for coming in. >> my pleasure. >> coming up planning for your portfolio the year ahead. we're going to continue our what's working series with john rogers when we return. at a dry cleaner, we replaced people with a machine. what?

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welcome back to "squawk box" this morning. let's take a look at some of the stocks that are on the move in this morning's trading day. sears shares moving higher in premarket trading. with two pieces of news in the mix. ceo louis d'ambrosio is leaving the company in february due to family health matters. chairman eddie lambert is going to be taking over as ceo. sears says they expect comp store sales to show a 1.8% decline primarily due to slumps of consumer electronics. also watching target this morning. the retailer says it will price match year round including amazon.com and websites run by walmart, best buy and toys "r" us. target already had a price matching for brick and mortar retailers but not online. and yum brands says same-store sales in china fell more than expected in the fourth quarter due to a chinese government

inspection of its poultry supply. china has been yum's fastest growing market. and monsanto reported the first fiscal quarter profit of 62 cents per share, well above estimates of 37 cents. revenue also beat consensus and the company raised full-year forecast, crediting increasing contributions from latin america. and momentum in its seeds. we also have a quick headline on carlyle this morning. carlyle announced preliminary performance metrics for carry fund, valuations increased 4% during that period. but for the full year carlyle funds were up on average 14%. finally, jes staley is leaving jpmorgan to join blue mountain capital management. 's going to be purchasing a stake in the hedge fund. he had been head of jpmorgan's investment banking unit. jamie diamond named two younger executives to be co-chiefs of commercial investment banking.

staley will join kate kelly on squawk on the street at 11:00 eastern this morning. you don't want to miss that. >> we've been talking about mortgages this morning and steve liesman is here with more on the dprop in mortgage applications. rick santelli joins us from the cme in chicago as well. steve what are you watching? >> first i'm watching this increase we've had in the ten-year yield which has gone up as you know, 10, 15 basis points over the past several weeks. >> 1.9%. >> right, right. but we haven't seen it really in the 30-year mortgage. so i thought i would draw on, you know, rick's expertise and our expertise from our co-host this morning to try to get an idea for the direction. just want to show you some charts here. first thing is you'll see the 30-year rate remaining pretty much flat. and of course the federal reserve is going to come along and buy a whole bunch of mortgages this year. and still buy treasuries as well. what you see is the spread, i guess that's the mortgage application number that was going to be the second one showing its decline. you could see it down despite rates being low. and there's the one. there's the yields going up on

the ten-year, and there's the mortgage rate being flat, so the question for individuals out there, is this the time to get in before the 30-year mortgage follows the ten-year higher? or do they believe the federal reserve purchases will keep down interest rates? or, what about this idea that the fed itself is acting at cross purposes and it is hammering or regulators in general hammering on one side, when it comes to underwriting standards, and yet trying to get people to take loans through its monetary policy. so let me just throw that to you. >> absolutely. that is no question about that. you can see that in the banking business. of course, the fed prints money like crazy. at the same time, to this day, the regulators have tightened lending standards across the whole industry. in fact the lending standards are the tightest in my 40-year career at bb&t. >> we think bernanke tunes in. look in the camera and tell ben what you need? >> ben we need for you to call off your regulators. one thing you can't do if you're trying to set national standards

like they're going to do in mortgages, you're going to set the standards tie tight and take away judgment. small business lending, for example, there's some mathematics to it and a lot of art. if you take away the art which happens with national standards what you have to do is tighten the standards so much that a lot of people that would make it and would be successful don't get the loans. there's no right answer to national standards. there's judgment that has to be made. >> rick, talk about the spread dynamic and what you expect here. it's wider right now than it has been. do you expect that gap to narrow? rick? >> are you talking to me? >> yeah. >> you know, i don't actually see a major rise in interest rates. i don't see the fed's programs really having a huge effect. i think we'll be looking at fees going up in some of the states that seem to have the most expensive process of foreclosures. but i don't see a lot of change. in my opinion it's very

disheartening when i hear about these settlements with banks, that i really think are, i don't see the point. i don't see who's damaged. i'd like that "journal" article today. and on the other hand, i think while we have the zombies and the fha still integral in the process, any discussion about this is almost crazy. and then when you think about the consumer protection group, you know, if we need this much protection and buyer beware isn't the kind of phrase we want to put on the door, then we don't really have a mortgage problem. we don't really have a fed problem. we have an education problem, with the end consumer. and the housing market. but i do agree, and i happened to catch a bit earlier, that you know, looking at a house as an investment versus utility, that dynamic has been ebbing and flowing. i hope it stays with the latter. because i think the former and all the home equity loans and all the college educations paid for has never fully been vetted and accounted for. >> so rick can i just try this another way.

let's say you were going to get a new carburetor for one of your 1965 lincolns out there and the guy at the auto parts store recognized you, rick santelli, i'm thinking about getting a mortgage now. is now the time to do it or are rates going to go lower or higher? >> do it now. do it now. do it now. i've been saying that for the last year or so. and i still think it's a wonderful idea. i think it's a speck in history, this is all for the buyers that can get financing. no doubt. >> john, what's your take on the direction of mortgage rates? >> i think that they're not going to move a lot this year. i think the fed is going to do everything it can -- >> you think if the fed didn't buy mortgages they would move a lot? >> no, i think they'd go up. >> you think the fed is, in fact, keeping them lower. >> i think it is artificially holding rates. it's hurting savers and urging people to consume housing. >> is it helping out your mortgage business? >> sure. >> all right, steve, thank you very much. rick, thank you. we will talk to both of you guys again very soon. >> more from our guest host senator ron johnson and cato

institute president john allison. rick was talking, and i thought of something, john, that i watched the coverage last night of the mortgage settlement, and the billions that were being anted up by all the banks, and the portrayal by mainstream media, i always love it, but they looked at how many people had actually been foreclosed upon, i believe, and they divided the number of people by the amount of the settlement to show that it was only $862 per foreclosure. so that -- and they highlighted a lot of critics that said this is just a slap on the wrist for all these really bad actors. and then i tried to figure out if it was paperwork and floppy accounting, right? most of the people that were foreclosed upon were late on their mortgages. there wasn't any question that the people were not paying their mortgages. right? >> absolutely no question. in fact, most states it takes years to foreclose on a house. >> what do you think of the

media's portrayal -- i watched just in disbelief as i watch so much when i watch news at night, but it was that only 860 -- >> banks agreed to pay $8.5 billion. >> i know. why? why do you -- >> why do you agree to do that just to get it to go away? >> to get it to go away and also because they're regulated by the government. they can't even stay in business unless they -- >> but there were so many foreclosures going on. where were the short cuts? they took robo signing and it was maybe not having all their things in order. >> i think the whole issue -- >> but they never foreclosed on people that weren't -- >> never foreclosed -- >> in an error -- >> and it's ignoring responsibility of the consumers. people didn't go buy a house because the bank made them buy a house, right? >> watching that, i just -- i was just these horrible, horrible banks. only gave $862. they did these terrible things that when you so when you divided it all out the $8.5 billion it was only $862 per person. and i was thinking wait a minute, i think all these people

were actually foreclosed important. >> -- tort system. that's one of the problems in our economy is a legal system -- >> but this is the attorneys general. >> right. >> i understand across the border our legal system is also increases -- >> tort reform -- >> look, i don't know how i feel about this particular case but the larger point is, yes, absolutely the banks should have gone after the people who should have been foreclosed upon. but you have to go properly. that's the law. if you don't do it properly you don't do it properly and you got to pay the fine. that's the deal, right? >> when the federal government is in the short circuit the bankruptcy process or the law that's been dealt over decades that's a bad thing. it creates a high level of uncertainty. >> but these were really technical issues about how they mechanically had something signed. we didn't do it in bb&t and we didn't have any problem with that. >> and you didn't have any part of this? >> we didn't have any effect. >> but these robo signing houses where they literally have people who were signing other people's names, didn't know what they

were signing. that's not great, right? >> mechanically it's not great. but practically that debt never gets through the legal system -- >> -- ceo of your company is that acceptable at your company? >> no. >> end of discussion. >> but i don't know -- >> my point was the way that e the -- it's presented is that the banks were foreclosing on people that didn't do anything wrong. and -- >> i agree with you. there have been media reports that i think have overplayed -- >> i'll give you, congress has a responsibility -- >> and also the government is trying to free up credit so that all these locked markets can get better. and every time you hit the banks with another $150 billion, it just, they're looked at as the bad guys. you know, fine them for $10 billion. collect -- >> in the -- >> somewhere where it's not going to do any good. but it's not going to go for lending for new houses. >> in the end consumers pay for it. but the spreads in the mortgage business versus 30-year bond has gone up and the reason for that is the cost of servicing has

gone up radically because of these kind of issues. so the consumers today are paying for that stuff, because banks don't make high enough profit, they return on capital is below acceptable rate by a lot of trading less in the cost of capital. so, but also i want -- what happened. bb&t we wouldn't do for example pick a payment mortgage loans. we refused to do them because we thought it was bad for our customers. we had a lot of customers come in and say i want a pick a payment mortgage and they went over to countrywide and got it because they thought it was a better deal. they knew exactly what they were doing. are they victims? no. >> all right. >> we'll have more from john allison, new president of cato and senator ron johnson. >> okay, coming up a portfolio planning session with arrow investments john rogers. our working series continues with a look at the sectors that will profit most in 2013. and tomorrow, we're going to talk global equities with wintergreen's adviser ceo david winters. after all these years.

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welcome back to "squawk box" this morning. markets pulling back after a very strong start to the new year. is slow and steady the right strategy for an uncertain political environment? that's our question. our "what's working" series continues with arrow investment chairman john rogers. the current chairman of president obama's advisory council on financial capability, and we are twliled to have you here this morning, john.

>> great to be back. >> so what is working in this environment? or what do you think is going to be working in 2013? >> well, i think that the housing rate of stocks are going to continue to do very well. warren buffett's talked about the fact of how important the recovery in the housing market is for the overall economy. jobs get creative because of it. and i think that momentum is going to continue into 2013. >> okay so let's go through a couple names. names of companies that you really like. in the housing worlds. >> we've had a lot of success from carpet manufacturers like mohawk and inner face. we also own first american financial which is one of our best performers last year. and we're looking for any of the companies that have any ties to housing markets. we think that can really have a real impact on our performance in 2013. >> i see you're also interested in financial services. what's the back story? >> well, you know, that's a favorite area. warren always talks about investing in the circle of confidence. something that you understand. i serve on a number of

investment committees. i run an investment management company about 30 years. so we feel like we know that world really well. so our favorite stocks are some of the alternative investment companies that have really made a difference in more and more investors going to alternatives. subpoenas like lazard i think they do a great job. companies like blackstone or kkr. a huge name in private equity. and janus, a controversial name but we think janus is going to benefit from the economic recovery. >> let's walk through some media companies. we work for a media company so i'm happy to see you're interested in something in this world. but, i don't think you're necessarily recommending comcast right this second. you like cbs. >> cbs has done a wonderful job over the last several years. les moonves, a very powerful ceo, very effective ceo. really made a big difference there. they've got great programming. great shows. great content. and at the same time, benefiting

by the fact that people are continuing to advertise on television. >> and you think that holds up when nbc prime-time really kicks into gear? come on. >> yeah, yeah, i'd give some kind of spread. >> it's still the best way to get a mass audience. it really is. >> newspapers. i hear you got a newspaper company you like. that, you know, i love that. >> the net has been one of our favorites for a number of years. it's done very well since the bottom of the market in 2009. >> does it hold up? >> it's held up very well. "usa today" is doing well. but also there are smalltown newspapers where the local content matters. i think that's something that's really been a powerful profit and. >> is that a long-term play? or you say for yourself i'm going to do this for a year or two, see how it goes or then i might have to get out because i don't know how sustainable this is. >> we're in it for the long run. even after the big run-up, still less than 10 times earnings.

has strong cash flows, and they also have television. they have career builder. they have other internet assets. so we think they're well noised for 2013, 2014. we're long-term investors. we want to own stocks for the long run. >> john i appreciate you're an investor for the long run. over the next two months, however, things may get a little more volatile before they get better. conversation we have often around this table is about the politics at the moment and what's going on in washington. you have a role in all of that. your sense on how everything's going to play out and how it's more importantly going to impact the markets. >> well, i think that the kind of ups and downs, kind of volatility that we've seen over the last several months, it will continue to have some big up days, and some big down days. but in the long run, you know, our capitalist democracy is the best economic system ever invented. even with all of our wars, with all of our problems, we'll find a way to solve these problems, get this budget crisis solved, and you know, when we look back

in 2014 we'll look back at this as a distant memory and won't have had any real impact. >> because there's a grand bargain? because what happens that does that? and the reason i ask is there's a sense that we're now going to have a series of fiscal cliffs in to perpetuity almost. >> but again, you know, eventually we do find a way to get through our problems. you look out throughout history, you know, and warren talks about this, you know, we get through the oil embargoes. we get through the swine flu. we get through the horrible wars that we've had in this country. you know, things that are much more problematic, these short-term manmade criseses that have happened in the congress. so things will be better as we go forward. and i'm extremely optimistic on the power of america to solve its problems, and do very, very well. >> okay. john rogers, we're going to leave it there. we thank you for joining us this morning. >> thank you. >> thank you. >> coming up the latest buzz from wall street. we're going to talk aig, sears, and eddie lambert, among

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welcome back to "squawk box." let's get down to the new york stock exchange. jim cramer joins us with more. we see there's two bits of news

for sears, jim. there's the eddie lampert news and the same-store sales down 9%. is that good? was that better than expected? has sears ever had positive comps 1234. >> at one point they did. there was a real estate trade at one point. these are not terrible numbers. was eddie lampert really running the company the whole time? >> i don't know. when we saw that news, it was like, i guess -- you know, i didn't know he wasn't running it. that's what i thought, jim. >> i think that's right, joe. not sure what happened. obviously a family member is not well, wish a speedy recovery. the stock is still overvalued. if the comps for sales numbers are still down, eddie lampert getting more hands-on. how much more hands-on can he be. a rising tide lifts all housing boats. but i think retail remains

challenged. appliances were better for sears. canada, warmer weather, not so good. it's a very mixed picture. but it's, frankly, you would expect it to be down big when the ceo left. which tells me that the ceo was always eddie. >> a rising tide. rising crimson tide. >> rising crimson tide. >> you didn't mean that, though. what else -- might as well stay with retailing. is this good for target? i wouldn't want to compete that the way they decided they're going to match all these other -- >> no, i agree. look, this is -- you decide to go against amazon, you're going against a company with tremendous cash flow. it's doing a lot of things right. it doesn't have to worry about the price multiples. it's the most overvalued stock we follow. you're going up against a company that has unlimited fire power. you don't want to be walmart or target. this group is so, so hard to navigate.

and everyone wants to navigate it ahead of a debt ceiling discussion. there's so many other areas that are easier. this is the toughest area i know. >> we've got to go, i think, jim. will we do 4% again in this country, gdp? again, we had people on and it's all 2, 2-1. ca can't we do that? >> no, i don't think so, unless we cut spending dramatically. we need to cut spending in the country and then we can do that. that's been the course of what has happened in human events in countries. they get their spending down and then great things happen. but obviously, joe, we're not doing that right now. >> we may need another election in two years to do that, i don't know. we'll see, jim. >> thank you, joe. >> all right. >> that is the perfect segway, because coming up our guest host this morning has been senator ron johnson, and john allison. tomorrow on "squawk box," can markets continue to climb or

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